Correlation Between Value Fund and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Value Fund and Goldman Sachs at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Value Fund and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Value Fund Value and Goldman Sachs Short, you can compare the effects of market volatilities on Value Fund and Goldman Sachs and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Value Fund with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Goldman Sachs.

Diversification Opportunities for Value Fund and Goldman Sachs

0.08

Correlation Coefficient

Value Fund  Goldman Sachs

Significant diversification

The 3 months correlation between Value and Goldman is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Value and Goldman Sachs Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Short and Value Fund is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Value Fund Value are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Short has no effect on the direction of Value Fund i.e., Value Fund and Goldman Sachs go up and down completely randomly.

Pair Corralation between Value Fund and Goldman Sachs

Assuming the 90 days horizon Value Fund Value is expected to generate 9.04 times more return on investment than Goldman Sachs. However, Value Fund is 9.04 times more volatile than Goldman Sachs Short. It trades about 0.13 of its potential returns per unit of risk. Goldman Sachs Short is currently generating about 0.22 per unit of risk. If you would invest  5,491  in Value Fund Value on October 24, 2024 and sell it today you would earn a total of  107.00  from holding Value Fund Value or generate 1.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Value Fund Value  vs.  Goldman Sachs Short

Value Fund Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Fund Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Goldman Sachs Short

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Short are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Value Fund and Goldman Sachs

The main advantage of trading using opposite Value Fund and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Goldman Sachs can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.

The idea behind Value Fund Value and Goldman Sachs Short pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.